Podcast: Why we’re turning to ‘new terraces’

What do you do when you want the shared responsibility of strata but don’t particularly want to live with people above and below you?

You buy or rent a townhouse, which is the fancy-pants modern name for what we used to call terraces.

It seems that while pre-sales and construction of apartments are going down, sales of townhouses are on the way up and in this week’s podcast, we discuss why that might be.

Listen Here

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Then we turn our gazes south to Victoria where their new strata laws have just passed.  OK, they won’t come into force until December, but we ask if they are blazing a trail for NSW strata laws to follow.

And we preview Sue’s trip to the front line – well, a new apartment block under construction – with Building Commissioner David Chandler.  Will she need body armour?  Will he? It’s all in the Flat Chat Wrap.

Transcript in full

Jimmy  00:00

So, it seems that people are buying fewer apartments, but more townhouses.

Sue 0:07

Oh, like strata townhouses?

Jimmy 00:10

Yep, most townhouses are strata these days, even in Randwick, where they tried to make everybody have company title.

Sue 00:18

Right.

Jimmy  00:20

There’s that, and there’s big changes to the law in Victoria, so we’ll be talking about that. I’m Jimmy Thomson. I write the Flat Chat column for the Australian Financial Review.

Sue 00:31

And I’m Sue Williams. I write about property for Domain.

Jimmy 00:35

And this is the Flat Chat Wrap.

[MUSIC]

Jimmy

Okay, Sue, there’s new figures from a company run by your old sparring partner, Dr. Andrew Wilson.

Jimmy

What they’ve indicated is that the government has been pumping money into the building sector; most of that money is going into stand-alone houses. The number of purchases (or the builds starting), for apartments has actually plummeted. It’s going right down, but going down by less, is townhouses. You look at the graph (and the graph is on the Flat Chat website)…I’d say in about six months, it could actually meet; the number of townhouses, and the number of apartments are going to be about the same, which shows a big shift in people’s thinking about how they want to live. They want to live in strata, because of the benefits of that, but they don’t want to necessarily live in apartments. Why is that?

Sue 01:57

I wonder if that’s the influence of the downsizers on the market. A lot of older people are a bit more nervous about moving into apartments, if they’ve never lived in them before. They’re a bit anxious about having to deal with an owner’s corporation or a body corporate. 

I was talking to someone the other day from the Australian Housing and Urban Research Institute. They were saying that, often older people were a bit nervous about moving into apartments, if they’ve never lived in them before, because they’re nervous about who their neighbors might be, and whether there’s going to be a noise above them, or next to them or below them.

They can’t quite get their head around the fact that (hopefully), apartments are built to be almost soundproof, but you know, I grew up in a terrace house… We heard everything our neighbors said; both sides of us and it wasn’t such a big deal really. You just kind of got used to it. Well, I didn’t know anything different when I was a kid.

Jimmy 03:03

That’s the key; you know, if you’ve lived in a house where you’re separate; even these big McMansions are exactly one meter apart, or whatever it is. You’re not going to hear your neighbor so much, except when they go out into the backyard.

Sue 03:18

I’m arguing you often do, and there’s less you can do about it, when you’re living in a house. If the house isn’t so well-built, you’re always going to hear your neighbors from next door if you’re in a terrace. We know somebody who lives in a terrace and has terrible trouble with neighbors’ noise and that’s in Kirribilli in the lower North Shore of Sydney.  

It’s quite a posh terrace, really, but she still hears everything her neighbors say. I think a lot of people live in houses where the noise transmission is pretty terrible. The thing with apartments is, you can actually do something about it.

 You can talk to your owners corporation, and they can tell people to be quieter, or to stop wearing high heels on wooden floors… Regulate the amount of noise they’re making.

Jimmy 04:04

Can they do that?

Sue 04:06

Yes, they can, because you’re entitled to the peaceful enjoyment of your own lot.

Jimmy 04:08

I mean, for instance, one of the classics we’re getting is as that more families move into apartments… The people upstairs, they’ve got kids and the kids are always running around, and it makes a noise. Can you go to your owner’s corporation and say, ‘can you stop these children from running around?’

Sue 04:27

Well, you probably can’t stop the children from running around but the owner’s corporation could suggest alternative floor coverings that might make the problem a lot less.

Jimmy  04:36

The problem is that a lot of families think ‘we’ve got kids; kids are messy. Let’s put down tiles; let’s put down timber floor and it’s easier to clean.’ I mean, we do that. We have that because we’ve got cats. So, I assume children are even messier than cats, sometimes.

The downsizer thing (according to the University of New South Wales), is that only 3% of people in apartments are downsizers; empty nesters, retirees and there’s a theory that it’s related to COVID. People want more room, and people want to be separate from other people, for obvious reasons.

That whole thing of social isolation that we had drummed into us over the past year, actually has an effect. People are stepping away from other people. You see it in the street; you see it in cafes, and it’s not a conscious thing anymore. You just find a space as far away from the nearest people as you can get.

Sue 05:45

That’s right. I was watching a movie the other day, and there was a big crowd of people all crushed together, and I immediately thought ‘oh, my goodness!’ I would never have even thought about it before.

Jimmy  05:55

I wonder if it’s more a case of people wanting to find their own space, and more of it?

Sue 06:01

Maybe that’s true. As well, we can’t ignore the damage that Opal Towers and Mascot Towers have done to the sector. People are very, very nervous about tall new buildings.

Jimmy 06:13

Because there are no guarantees.

Sue 06:14

The Building Commissioner, David Chandler, is obviously doing his best with the new buildings coming up, but with the older stock that’s still around, people are a bit anxious about that.

Jimmy  06:24

Yes, and I was reading somewhere else (it might have even been you, writing in Domain), that developers are looking at building bigger apartments. We’re still building high-rise blocks or medium -rise blocks, but the actual floor plan of the apartments will be bigger, to accommodate this need for more space.

Sue 06:46

That’s right and also, the families want to be closer as well. We’ve had a lot of younger people moving back with their parents, because of COVID and probably, at the end of Job Seeker, and Job Keeper…You know, Job Seeker is going to disappear, and people are going to be back on those miserly payments again, and with the end of Job Keeper coming up; there’s probably going to be a whole wash of new people moving in with their parents, because they just can’t afford to live without work anymore.

When they’re building these apartments with bigger floor plans, they’re also building them with separate living areas to accommodate if grown-up kids coming back, or if elderly parents move in, because they’re a bit nervous about aged care now, after the COVID outbreak. So, they want them with separate living areas, with a little bit of extra living room so a couple can live in there; maybe their adult kids or grandparents, and they can have their own lounge room, as well as their own bedroom.

Jimmy  07:51

I’m thinking of a big, locked metal door. ‘That’s where we keep Grandpa; don’t go, in whatever you do! It’s awful in there!’ When we come back, we’re going to talk about the new laws in Victoria.

[MUSIC]

Jimmy

Just a quick clarification. It was only after had recorded this podcast that we realized that the new strata laws in Victoria don’t actually come in until December 1^st so we’re slightly ahead of the game here, but it’s interesting, nonetheless.

Sue 08:34

What are the new laws in Victoria, then, Jimmy?

Jimmy 08:36

Well, there’s a lot of them. They’re still sticking with the 2006 Owners Corporation Act; they haven’t changed that. The bones of the Act are still there, but they’ve changed just about everything in it. In some cases, it might be just the use of one word to make it in line with the rest of the state law, so that everybody knows exactly what they’re talking about.

But there are significant changes; they now have four tiers. Here in New South Wales, we’ve got two tiers of owner’s corporation… 100 units and over (which is large), and 100 (or less than 100), which is not large. In Victoria, they will have 51 or more (is large), then there’s 10 to 50. There’s 3 to 9, and then there’s 2 units.

So, they’ve got four tiers, and a different set of regulations. In some levels, everybody’s under the same, and in other levels, there are certain exemptions.

One of the things that they have is that in the large ones they must have a strata manager; that’s compulsory. We don’t have that here. There are some huge buildings here that are run purely by the committee, with advantages and disadvantages to that. In Victoria, that wouldn’t be allowed to happen. These large buildings have to have a professional strata manager.

Sue 10:04

Do you think that should come into New South Wales as well?

Jimmy 10:08

Yeah, I do actually, and I think over a certain level, they should have a professional building facilities manager, although how you would define that (because there’s no registration required for building facilities managers in this state).

That would be another thing that we should be looking at. They are coming into line with us; Victoria, are coming into line with New South Wales in terms of the length of management contracts. So, strata managers can only be signed up for three years and apparently, this applies to building managers as well, which we don’t have that.

Here, still, in New South Wales, you can sign up for a contract for 10 years, with the building manager having an option of another 10 years. So basically, depending on how the contract is signed, it could be a 20-year contract.

Sue 11:03

That’s a bit of a worry isn’t it, really?

Jimmy 11:06

Well, it’s here, but hopefully, we are having our review of strata law…

Sue 11:10

Okay, so maybe we will change and go back to something less…

Jimmy 11:14

Yeah, I think it’s almost certain that building facilities managers will be regulated, and that they will be restricted to three-year contracts at a time. There was a lot of howling and squealing when the government suggested three-year contracts.

Here, strata managers have a one-year contract at the beginning; at the very beginning of a building’s life. Then they go on to three and three and three. There’s no automatic renewal or anything like that.

The strata managers were complaining about that before it came in, and now they’re fine with it, because they realize that if they do their job properly, then the at the end of the three years, they’re going to get renewed anyway, because the hassle of not renewing is so high, but there’s always the option there for the owners corporation to go ‘we’re not happy with what you’ve done.’

Sue 12:09

It’s kind of hard for strata managers, because they really invest in a building, especially at the beginning. They say they’ve set up the systems; have all the records. You’re right. I mean, nobody’s really going to be thinking about changing strata managers, if they’re happy.

Jimmy 12:27

Yeah, but the problem in the past was that the strata manager (as we found in our building), the strata manager set up the systems. The developer comes along and says, ‘hey, look, these guys have set everything up, so, you don’t want to stuff them around.’

Then you find out, you’ve signed them up for 10 years, and you find out that they have stuffed things around, and they have made huge mistakes. You’re looking at legal action, then, to get rid of them, which is now not a problem in New South Wales.

Soon, actually, it will not be a problem in Victoria. It used to be in Victoria, that you had to have a special resolution to start legal action and they’ve changed that, slightly. It’s now a simple majority at an owner’s corporation meeting; they can start legal action up to a certain level (which is basically up to magistrate court-level).

Sue 13:29

With a special resolution before, you needed at least a two thirds majority, didn’t you?

Jimmy 13:32

75%. I mean, they’re special resolutions; they can have an interim special resolution and then if a certain number of people object to it, then it doesn’t go through.

Sue 13:45

So, it will be much simpler with a simple majority, as well.

Jimmy 13:47

It will. Anything up to Magistrates Court, including VCAT, which is the tribunal (it’s like NCAT). That comes under the simple majority. County Court and above, they’ve still got to have a special resolution. Why? That’s when it starts to get really expensive.

It means that they can take people to court for debts and things like that. They don’t have to get a special resolution, which can be really hard. You know, especially in Victoria, where the numbers are counted at some point by the whole number of people in the building, not just the people who’ve turned up at the meeting.

Sue 14:26

That’s hard, isn’t it, especially when you’ve got lots of investors.

Jimmy 14:30

There’re other things, like the size of the strata committee. They tend to do things in Victoria, like, ‘okay, this is how it should be, but you can change it.’ At the moment, I think the maximum size of the committee in Victoria is fourteen, or something like that.

What they’re saying now is the default is seven; seven people on your committee, but you can choose to have more, up to twelve. They also have weird things, like the chairman on their strata committees has the casting vote, which we don’t have. I don’t think it’s a good thing, knowing some of the chairpersons I have encountered across my long history in strata! Insurance things; basically, everything has to be charged, according to your unit entitlements, in terms of levies, except if there’s an insurance impost.

I think we also have this in New South Wales, where the owner’s corporation is having to pay additional insurance, because of what somebody in one unit is doing. Then, you can charge the excess insurance to that specific unit, above and beyond their unit entitlements; above and beyond their ‘normal fees,’ as they call them.

There is a whole range; a whole raft of things. We’ll be talking about that on the Flat Chat website. It seems like in some ways, they’re catching up with New South Wales, and in other ways, they’re kind of nudging ahead of us.

Sue 16:01

Oh, no!

Jimmy  16:03

Well, I think it’s good. It’s a little race, that keeps everybody on their toes.

Sue 16:08

It’d be nice if Queensland joined in as well.

Jimmy 16:10

No chance of that; it’s a different world up there. It’s a world where strata owners are being punished for living in aberrant behavior; wanting to live off the ground.

Sue 16:22

That’s a bit harsh, but they do have some really odd rules and regulations. It’s kind of difficult.

Jimmy  16:30

Yeah. At the very least, the presale of management contracts, which is just a disgrace, an absolute disgrace. You talk to strata managers there and they say, ‘oh, you know, the whole system would fall apart if we didn’t have that.’ Well, the system for putting more money into developer’s pockets; that would fall apart.

Sue 16:49

Yeah, yeah.

Jimmy  16:50

Sue, when we come back, you’re gonna tell us about a problem with certifiers; that’s after this. Okay Sue, what’s the problem with certifiers now? What are they up to?

Sue 17:06

Well, I was contacted by their association, who were saying the New South Wales government introduced a new planning portal (which is kind of an online system for people who want to fast-track developments and certifiers look at this system and try and work out what’s happening and they fill in the forms and put in the applications, that kind of thing). In theory, it sounds great. The idea was that it would cut red tape, but the association says it’s doing quite the opposite. It’s just not working properly. It’s not functional at all. It has all these glitches; it just doesn’t really seem to obey the regulations properly.

They’re having enormous problems with it and they say the difficulties are leading to real delays in buildings, which is quite opposite to what the government intended and may add to housing construction costs in the long run. That’s becoming a real problem, because the government wants to invest in infrastructure. They want to really have a lot more building projects going on, to help boost the economy and jobs at this time. You know, one hesitates to say post-COVID…

Jimmy  18:07

I mean, certifiers in the whole Opal and Mascot Tower thing; certifiers were really put in the firing line, weren’t they?

Sue 18:13

They were really; I think there’s often a lot of misunderstanding about their role. Their role is often looking at paperwork; it’s not to actually go out and inspect buildings. It is to make sure that the as-built plans match the original plans; that the floor spaces are the same… All the documentation is correct.

Jimmy  18:32

So, they are checking when the plumbing guy says here, ‘I’ve signed off on the plumbing…’ They’ll look at that document and say, ‘okay, the plumbing guy has signed off on the plumbing and so that means that this must be okay.’ They’re not actually ‘looking at…’

Sue 18:46

No, they don’t step onto building sites and actually check the work.

Jimmy 18:49

So, they copped all the blame (unfairly to a large extent, although there was a lot of justifiable doubt about the way they were actually doing that). They weren’t even checking the paperwork, in some cases. Now, here’s this new system, where you can go online, and it doesn’t even work.

Sue 19:20

I went to the minister’s office and put to him their complaints and now the department is having a meeting with them, to talk through the issues that they’re facing, because they want this portal to be suspended and to be redone, and then relaunched, properly. The department is now going to look at their complaints very seriously. Before, they’d been looking at them, but they kind of waved them away, but now they’ve got a meeting with them, I think as a result.

Jimmy  19:48

Is that a good thing, or are they just being fobbed off?

Sue 19:51

I think they’ll find out in the meeting.

Jimmy 19:55

Meanwhile, we can preview something that you’re doing; a ride-along with the Building Commissioner, soon.

Sue 20:02

That’s right. I’m going out with him on a building site.

Jimmy 20:07

You’re riding shotgun?

Sue 20:08

Yes, seeing what he does, and then talking to some people that he’s inspecting and having a look at what’s happening there. It’s such an amazing thing, to have a Building Commissioner, after all these years. I mean, it would have been wonderful to have had one twenty years ago, really, but it does look as if this Building Commissioner is making a difference. I’ll be going out and seeing what he’s doing, and what the other people that he’s inspecting, say about it.

Jimmy  20:33

Are you going into a war zone? Are you going to have to wear a bulletproof vest? Are you going to have a United Nations helmet, with Press on it?

Sue 20:42

We’ll have to see. It could be interesting, couldn’t it?

Jimmy 20:47

I mean, if you go to a building site, and it turns out that he finds out something they didn’t expect him to find… Keep your phone on; record everything. Okay, that’s us for this week. Thank you all for listening. Thank you, Sue, for coming in.

Sue 21:02

Pleasure, Jimmy.

Jimmy  21:04

And we’ll talk to you again soon. Bye. Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, www.flatchat.com.au And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favorite pod catcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week.